The Buzz on Business for May 24rd 2024

“Good news is bad news.”

Here at the Ministry of Truth, those are words to live by. We’ve always been at war with good news.

On Thursday, we got some good news. Not, “We won the Mega Millions!” good, but NVIDIA crushed its first quarter and a couple of economic indicators came in a bit above expectations, although a couple did indeed miss—we’ll get into all the numbers in just a minute—but overall, the news was good.

And stocks and bonds sold off, hard, on strong volume. It was the worst day of the year, the worst day for stocks in a long, long while. And the news was basically good.

This is, of course, because the strong economic data makes the possibility of rate cuts more remote.

We find this mindset frustrating to say the least. Inflation is enemy number one. Premature rate cuts that ignite even higher inflation would be horrible for the economy, bad for stocks and would lead, ultimately, to much higher interest rates.

And rates aren’t even all that high! A five percent 2-year treasury is right in the middle of the range it’s been in over the last eighty years.

On Thursday and Friday of next week, the Fed’s preferred measure of inflation, the Personal Consumption Index complex rolls out. Maybe, just maybe, it will show that inflation is waving the white flag, in full disorganized retreat. If that is the case, we may then join those agitating for rate cuts.

We would be delighted to be wrong, but we are not expecting anything like that.

Stock Market Report

It was a rough day for stocks and bonds on Thursday. Nothing but red numbers all up and down the giant quote machine. Yesterday. Well, there was one green number. Volume. Volume spiked as decliners outpaced advancing stocks by better than five to one.

• The Dow Jones Industrial Average was off 606 points. That's over 1 1/2% and it closed at 39,065. Recall that just a week ago we were celebrating it's first close above 40,000.
• The S&P 500 was down 0.75%. That's 39 points, and it closed at 5268.
• The NASDAQ Composite fared a bit better on the back of NVIDIA and the chip stocks. It was still down 66 points. That's four-tenths of 1%. It starts the day today at 16,736.
• And the Russell 2000 was off 1.6%. That's 33 points and it closed at 2048.

Bond Market Report

Interest rates were up at all points along the yield curve on Thursday, although not as much as some of the headlines would have us believe.

• The yield on the 2-year Treasury was up six basis points and closed at 4.940%.
• The 20-year was up three ticks and it closed at 4.679%.

Oil, Gold, and Bitcoin

• Oil was down for the fourth straight day. It closed at $76.93 off $0.27.
• Gold had a horrible day. It's acting like a bond again. It was off $49.00 and a troy ounce will now set you back $2,333.30.
• Likewise, Bitcoin. It was off $2,358.99 and that 4:00 PM Eastern Time stood at $67,177.27.

NVIDIA Blowout First Quarter, Econ Data Mixed.

First, the good news. NVIDIA rallied on its blowout first quarter performance. The stock was up over 10% on the session. That's 10% when the broad market was down sharply. Seven companies reported earnings during the day on Thursday. Nothing but green numbers for both the top and bottom lines. First quarter earnings continue to look very, very good indeed.

And some good news out of the manufacturing sector. As regular listeners know, manufacturing has been in the doldrums for over two years now. But the S&P Global US Manufacturing Purchasing Managers Index poked its head up above 50, indicating expansion in the manufacturing sector. That's both above expectations and above last month's report.

And initial and continuing jobless claims both came in better than expectations.

So, some good news on both the earnings and economic front.

But new home sales, on the heels of yesterday’s disappointing existing home sales, fell sharply in April. Month over month, new home sales were down 4.7%. Last month they were up 5.4%. And building permits fell. Not dramatically, but falling is worse than rising.

Could higher for longer finally be impacting the housing sector.

Today we get another peek inside manufacturing as the durable goods orders complex rolls out. We also get the Michigan surveys for May, which includes the consumer sentiment survey. And the Atlanta Fed’s GDP Now report or the second quarter. Economists expect that, in so far in the second quarter, gross domestic product has increased at a 3.6% annual rate. Not gangbusters, but not bad. We’ll see!

We will have all of it for you bright and early on Monday morning. All you need to do is keep it right here on The Buzz.